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Daallo Airlines was established in 1991 in Djibouti by Mohamed Haji Abdillahi Abusita and Mohammed Ibrahim Yassin Olad.[6][7] It began operations on 20 March 1991 with one Cessna aircraft. Soviet aircraft are largely used, although some Boeing and Airbus aircraft have been added, enabling the launch of direct flights between Djibouti and Paris in July 2001, and flights between Djibouti and London in October 2002.

Daallo Airlines D3 is the designated carrier of the Republic of Djibouti. It operates scheduled flights from its hub, based in Djibouti–Ambouli International Airport JIB. The airline operates passenger, cargo, chartered and mail services to destinations in the Horn of Africa and Arabian Peninsula, including Dubai and Jeddah.

As of March 2007, Daallo Airlines had 110 employees. The carrier received new shareholders later in the year, the Dubai World subsidiary Istithmar World Aviation. Founders and owners Mohamed Haji Abdillahi "Abusita" and Mohammed Ibrahim Yasin "Olaad" remained as board members. In December 2008, Terry Fox, who had served as Director of Operations, was appointed Chief Executive Officer. The company maintained unbroken service on its main European route to Paris CDG and London Gatwick from Djibouti until 2009.

In March 2010, all flight operations were suspended, but service resumed later in the year.[5]

The Daallo Airlines fleet consists of the following aircraft (as of February 2016):[10] There is conflicting information concerning both the historic and current Daallo Airlines fleet. Daallo's official website does not mention the airline's present fleet. However, Airfleets.net shows Daallo currently operating a single Boeing 737-300.[11] Planespotters.net indicates that Daallo is currently[when?] operating a single McDonnell Douglas DC-9-30.[12]

Two men unsuccessfully attempted to hijack an Antonov airplane operated by Daallo Airlines on a flight from Bosaso to Djibouti. Armed passengers confronted the alleged hijackers when the two men drew their weapons, allowing the pilots to return the plane to Bosaso. None of the thirty passengers were harmed, and the aircraft was undamaged.

A man tried to board a Daallo Airlines flight in Mogadishu bound for Hargeisa, Djibouti and Dubai carrying powdered chemicals, liquid and a syringe. The incident bore similarities to the failed attempt to blow up Northwest Airlines Flight 253 travelling from Detroit to Amsterdam on Christmas Day, 2009. The man was arrested and taken into Somali police custody.

Five minutes after taking off from Mogadishu en route to Djibouti, a bomb exploded aboard Flight 159, opening a hole in the fuselage behind the 2R door. Pilots were able to land the plane at Aden Adde International Airport. Two injuries were reported and one man was claimed to have been pulled from the plane during or after the explosion, landing in the town of Dhiiqaaley near Balad, Somalia. The Islamic terrorist group Al-Shabaab later claimed responsibility for the bombing.